FOR IMMEDIATE RELEASE 2001-100
SEC Acts on a Number of Issues at Open Meeting of
September 25, 2001
Washington, DC, September 26, 2001 - On September 25,
during its open meeting, the Commission took action on a
number of issues as described below. Formal releases
regarding these actions will be available on the
Commission's web site at www.sec.gov as soon as possible.
Filing by Foreign Private Issuers on EDGAR
The Commission approved the issuance of a release
proposing rule amendments to require foreign companies and
foreign governments to file their Securities Act and
Exchange Act documents electronically through the
Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) System. Currently the Commission's rules
only permit, but do not require, foreign issuers to file
their securities documents on EDGAR. By mandating the
electronic filing of foreign issuers' securities documents
on EDGAR, the Commission seeks to realize the same investor
benefits and the same efficiencies in information
transmission, dissemination, retrieval and analysis that it
has achieved through mandated EDGAR filing for domestic
issuers.
The proposal would amend Regulation S-T, the
Commission's rules governing electronic filing, to eliminate
the foreign issuer exception from mandated EDGAR filing for
most Securities Act and Exchange Act documents. The
proposed amendments would require the electronic filing of
* foreign private issuers' Securities Act registration
statements and Exchange registration statements and reports;
* foreign governments' Securities Act registration
statements and Exchange registration statements and
reports;
* Multijurisdictional Disclosure System forms filed by
Canadian issuers;
* Statements of beneficial ownership on Schedules 13D and
13G and tender offer schedules that pertain to the
securities of a foreign issuer, whether filed by foreign or
domestic person;
* Form CB, the form used for cross-border rights offers,
exchange offers and business combinations that are exempt
from the tender offer rules Securities Act registration, if
the filer or the subject company is an Exchange reporting
company; and
* most Trust Indenture Act forms.
The Commission is soliciting comment on its proposal to
mandate EDGAR filing for foreign issuers. Comments must be
submitted within 60 days after the proposing release will be
published in the Federal Register.
Extension of Compliance Date for Rules on Mutual Fund After-
Tax Return Information
The Commission considered whether to extend the
compliance date for certain amendments to rule 482 under
the Securities Act of 1933 and rule 34b-1 under the
Investment Company Act of 1940, which require that mutual
fund advertisements and sales literature include
standardized after-tax returns if the sales material either
(i) includes after-tax performance information; or (ii)
includes any performance information together with
representations that the fund is managed to limit taxes.
The compliance date for the rule amendments was October 1,
2001, and has been extended to December 1, 2001.
Implementation of the Commodity Futures Modernization Act of
2000: Proposed Rules Governing the Collection
of Customer Margin for Security Futures
The Commission approved the publication of proposed
rules governing the collection of customer margin for
security futures. The proposed rules are also being
considered by the Commodity Futures Trading Commission
("CFTC") and, if approved for publication, would be jointly
published for comment by both agencies.
The Commodity Futures Modernization Act of 2000
("CFMA") lifted the ban on trading in security futures and
related products and established a framework for the joint
regulation of these products by the Commission and the CFTC.
The CFMA also authorized the Board of Governors of the
Federal Reserve System ("Board") to prescribe customer
margin requirements for security futures products subject to
certain statutory criteria. The Board delegated this
authority jointly to the Commission and CFTC, as expressly
permitted by the CFMA, by letter dated March 6, 2001.
The proposed rules would apply to margin arrangements
between brokers, dealers, and members of national securities
exchanges and their customers with respect to security
futures, subject to certain exclusions described below. The
proposed rules would include the following provisions, among
others:
* Customer Margin Levels for Security Futures. The
proposed rules would require each party to a security future
to provide and maintain, on a daily basis, margin equal to
20 percent of the current market value of the security
future. Individual national securities exchanges and
associations, as well as individual firms, may impose higher
customer margin levels.
* Margin Offsets. The proposed rules would permit
regulatory authorities to reduce the margin levels for risk-
reducing offset positions involving security futures,
consistent with comparable offset positions involving
exchange-traded options. The release would preliminarily
identify margin levels for certain strategy-based offset
positions involving security futures that are consistent
with the levels for comparable offset positions involving
exchange-traded options. National securities exchanges and
associations would have to file proposed rule changes with
the Commission to implement these offsets.
* Time Limits for Collection of Margin. The proposed
rules would require firms to collect initial and maintenance
margin from their customers as promptly as possible, and in
any event, within three business days. Individual national
securities exchanges and associations, as well as individual
firms, may impose shorter time periods for the collection of
customer margin.
* Forms of Collateral. Customers may satisfy their
margin requirements under the proposed rules using the same
types of collateral permitted under Regulation T,
specifically, cash, "margin securities" (as defined in
Regulation T), and exempted securities.
* Applicability of Regulation T. The proposed rules
would incorporate the provisions of the Board's Regulation T
by reference whenever possible to ensure that existing and
future Board interpretations under Regulation T apply to
security futures.
The proposed rules would exclude from their scope the
following margin arrangements, which generally parallel the
exclusions found in Regulation T:
* Portfolio Margining Systems. The proposed rules would
not apply to margin arrangements that comply with a
portfolio margining system established under the rules of a
national securities exchange or association that have been
approved by the Commission.
* Margin Arrangements with Certain Broker-Dealers and
Exchange Members. The proposed rules would not apply to
margin arrangements with Regulation T "exempted borrowers"
(i.e., broker-dealers and exchange members that conduct a
public securities business) as well as certain broker-
dealers and exchange members that act as market makers in
security futures. The proposed rules would identify the
criteria that broker-dealers and exchange members would have
to meet to qualify for this exclusion.
* Margin Arrangements with Foreign Persons Involving
Foreign Securities. The proposed rules would not apply to
financial relations between a foreign branch of a broker-
dealer or exchange member and a foreign person involving
foreign security futures.
* Margin Requirements Imposed by Clearing Agencies. The
proposed rules would not apply to margin arrangements
imposed by registered clearing agencies on their members.
The proposed rules would be subject to a thirty-day
comment period. The Commission is not considering margin
requirements for options on security futures at this time.
Implementation of the Commodity Futures Modernization Act of
2000: Applicability of CFTC and SEC Customer Protection,
Recordkeeping, Reporting, and Bankruptcy Rules and the
Securities Investor Protection Act of 1970 to Accounts
Holding Security Futures Products
The Commission agreed to propose rules governing the
customer protection regimes for customers that own security
futures products. These rules are being proposed pursuant
to the Commodity Futures Modernization Act of 2000 ("CFMA"),
which lifted the ban on trading in security futures and
related products and established a framework for the joint
regulation of these products by the Commission and the
Commodity Futures Trading Commission (the "CFTC"). The CFMA
directs the Commission and the CFTC to issue rules to avoid
duplicative or conflicting regulations applicable to firms
doing business in securities futures products that are fully-
registered with both the Commission and the CFTC. The
proposed rules would also reduce duplicative recordkeeping
and reporting regulations applicable to futures commission
merchants that become notice registered with the Commission
as broker-dealers solely for the purpose of trading security
futures. The proposed rules are designed to provide firms
and their customers with flexibility in how security futures
will be handled without compromising customer protection.
The proposed rules contain the following provisions, among
others:
* A firm fully-registered with both the Commission and
the CFTC would be able to choose, or allow its customers to
choose, whether to hold security futures products in a
futures account subject to the segregation requirements of
the Commodity Exchange Act ("CEA") or in a securities
account subject to Exchange Act Rule 15c3-3 and the
Securities Investor Protection Act of 1970 ("SIPA").
* Broker-dealers would be required to furnish customers
with a disclosure document before accepting an order for a
security futures product. The disclosure document would
have to include a description of the SEC/SIPA and the CFTC
customer protection frameworks, and a statement regarding
which framework would and which framework would not be
applicable to the customer's account.
* A firm fully-registered with both the Commission and
the CFTC would be required to obtain a signed acknowledgment
from the customer stating that the customer understands that
the account will not be protected under the alternative
customer protection framework.
* A firm fully-registered with both the Commission and
the CFTC would also be allowed to change the type of account
in which a customer's security futures products are held,
provided, among other things, that the broker-dealer
provides the customer with the disclosure document and
receives written acknowledgement from the customer stating
that the customer understands that the account will not be
protected under the alternative customer protection
framework.
The proposed rules would be subject to a thirty-day comment
period.
Extension of Compliance Date of Trade-Through Disclosure
Rule
The Commission extended the compliance date for the
Trade-Through Disclosure Rule for six months, until April 1,
2002. The extension delays the imposition of the Rule's
disclosure requirements on broker-dealers while the options
exchanges continue to work on the implementation of an
intermarket linkage. The extension also provides Commission
staff with time to better evaluate the exchanges' progress
in implementing the linkage. Absent the extension, the
Trade-Through Disclosure Rule, which requires broker-dealers
that route customer orders to an exchange that chooses not
to participate in a linkage plan to disclose to their
customers when their trades are executed at a price inferior
to another published quote, would have become effective on
October 1, 2001.
Extension of Deadline for the Exchanges and the National
Association of Securities Dealers, Inc. to Submit Rule
Filings Concerning the Implementation of Decimal Pricing in
Equity Securities and Options Pursuant to Section
11A(a)(3)(B) of the Securities Exchange Act of 1934
The Commission extended the deadline for the American
Stock Exchange LLC, the Boston Stock Exchange, Inc., the
Chicago Board Options Exchange, Inc., the Chicago Stock
Exchange, Inc., the Cincinnati Stock Exchange, the
International Securities Exchange, LLC, the National
Association of Securities Dealers, Inc., the New York Stock
Exchange, Inc., the Pacific Exchange, Inc., and the
Philadelphia Stock Exchange, Inc. (collectively the
"Participants") to submit rule filings concerning the
implementation of decimal pricing in equity securities and
options pursuant to Section 11A(a)(3)(B) of the Securities
Exchange Act of 1934. The Commission's Order of May 22,
2001 required the Participants to submit rule filings to
establish the minimum price variation in each market for
quoting equity securities and options by November 5, 2001.
In view of the market disruption caused by the attacks
of September 11, 2001, the Commission believes that it is
necessary and appropriate to extend the original deadline
until January 14, 2002. Granting an extension gives the
Participants adequate time to thoroughly analyze the
important investor protection and market integrity issues
that need to be addressed in order to preserve the benefits
of decimalization. Extending the deadline will also allow
the Commission to fully consider the comments submitted in
response to the Concept Release on the Effects of Decimal
Trading in Subpennies. The Commission has also today
extended the deadline for submitting comments to the Concept
Release from September 24 to November 23, 2001.
Extension of Comment Period for the Concept Release
On the Effects of Decimal Trading in Subpennies
The Commission extended the comment period for the
Concept Release on the Effects of Decimal Trading in
Subpennies until November 23, 2001. The Concept Release,
which was published in the Federal Register on July 24,
2001, solicited the views of commenters concerning the
impact of subpenny price increments for quotations, orders,
and trading stocks in a decimals environment. The release
requested comment in particular on the effects of subpenny
trading on market transparency, customer protection rules,
and automated systems.
The original deadline for submitting public comment
established by the Concept Release was September 24, 2001.
In view of the market disruption caused by the attacks of
September 11, 2001, we received requests from various market
participants to extend the original deadline. To provide
the public with sufficient time to adequately address the
issues raised in the Concept Release, the Commission has
decided to extend the comment period until November 23,
2001.
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